In context

Privilege of foreign in-house counsel: English court sets standard, Dutch to follow?

October 23, 2020
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In context

A recent high court judgment in England provides a clear-cut rationale for attributing legal advice privilege to foreign in-house counsel. The High Court concluded that it is the “function” of the relationship and not the “status” of the lawyer that is relevant in the case of foreign in-house counsel. It is not necessary to assess whether certain formalities are applied, as that would undermine the basic rationale for legal privilege.

 

Interestingly, this English ruling stands in contrast with the reasoning in a 2019 ruling by a Dutch district court, which focused on national formalities and ruled that certain foreign in-house counsel did not enjoy legal privilege because these formalities, in particular the signing of a professional charter as required by the Netherlands Bar, had not been met.

The High Court’s decision: foreign in-house counsel enjoy legal advice privilege based on rationale for legal privilege

PJSC Tatneft v Bogolyubov & Ors deals with an application made by a defendant in ancillary main proceedings. In the main proceedings, the claimant (PJSC Tatneft) had asserted legal advice privilege regarding communications between employees/officers of the company and members of its internal legal department. In its application, the applicant (being the second defendant in the main proceedings) requested that the claimant provide all documents that were previously withheld under the assertion of legal advice privilege. The applicant argued that legal advice privilege only extends to foreign lawyers who are “appropriately qualified”, meaning that they are regulated and “admitted to practice”. As the foreign in-house counsel in question were of Russian origin and, as in-house counsel, are by definition not “Advocates” (independent lawyers) under Russian law, the applicant argued that they could not be granted legal advice privilege.

 

The High Court concluded that regardless of whether the Russian system distinguishes between “Advocates” – that is, lawyers in the classical sense of the word – and in-house lawyers, the foreign in-house counsel in question did have legal privilege under English law, as they are legal professionals with the “function” of providing legal advice to the company.

 

The judgment takes the rationale of legal advice privilege in general as a starting point “for consideration of this issue as to the circumstances in which legal advice privilege can be claimed is the rationale for legal advice privilege which has been said to be that it is in the public interest that clients can obtain legal advice and that these communications should be kept confidential.” [emphasis added]. The High Court found it to be consistent with this rationale that legal advice privilege extends to foreign lawyers, as follows from an earlier judgment, the Prudential case.

 

The High Court then considered whether the particular national standards or regulations of foreign lawyers should be assessed in order to extend legal advice privilege to them. The High Court quoted Lord Neuberger in Prudential at [45], where he concluded that legal advice privilege is extended to foreign lawyers without having regard to their particular national standards or regulations. This approach was also followed by Lord Sumption in his dissenting judgment in Prudential at [126]. Subsequently, several other cases, such as Lawrence v Campbell and re Duncan, were discuss; these cases also placed the rationale of legal advice privilege at the forefront in their decision. In particular, in re Duncan, it was stressed that the “basis of the privilege is just as apt to cover foreign legal advisers as English lawyers, provided only that the relationship of lawyer and client subsists between them.” On this basis, it was then concluded that a functional approach should be taken with regard to foreign in-house counsel.

 

The High Court went on to discuss the applicant’s argument that this broader approach to the concept of a foreign “lawyer” would be “uncertain” and “self-defining”. The court rejected this notion while explicitly referring to grounds of “fairness, comity and convenience”. Specifically, the High Court considered that “it would lead to uncertainty (and thus inconvenience) if, even where the relationship of lawyer and client subsists, the court had to go further and examine particular national standards or regulations in order to determine whether in a particular case a party was protected from the disclosure of his communications with his lawyer. It would also raise issues of comity if the court were obliged to express views on the qualifications and regulation of foreign lawyers.”

 

Finally, the High Court concluded that the above equally applies to foreign in-house counsel and held that “legal advice privilege extends to communications with foreign lawyers whether or not they are “in-house” and thus employees of a particular company or organisation and the court will not enquire into how or why the foreign lawyer is regulated or what standards apply to the foreign lawyer under the local law. The only requirement in order for legal advice privilege to attach is that they should be acting in the capacity or function of a lawyer or as expressed by Lord Neuberger in Prudential at [19], it should relate to: “communications passing between a client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice” [emphasis added]. And the court added: “There is no additional requirement (…) that foreign lawyers should be ‘appropriately qualified’ or recognised or regulated as ‘professional lawyers’.”

 

In summary, according to this judgment, legal advice privilege applies to persons acting in the “capacity” or “function” of a lawyer, and this also applies to foreign in-house lawyers, while these do not have to be “appropriately qualified” or regulated as “professional lawyers”. As for the term “lawyer”, the Prudential judgment considered this to be “members of the legal profession” while – non-exhaustively – referring to certain professional associations.

 

Legal privilege in the Netherlands – current status

Turning to the current status of legal privilege in the Netherlands, the teleological approach adopted in this decision of the English High Court, corresponds with the approach recently adopted by the Dutch Supreme Court in its decision on legal privilege in inquiry proceedings before the Enterprise Chamber. For our article on this decision, click here.

 

According to the Dutch Supreme Court, it is a general principle of law in the Netherlands that the public interest of the truth coming to light is outweighed by the public interest of everyone being able to freely turn to lawyers for assistance and advice without fearing disclosure of whatever has been entrusted to these lawyers. According to the Supreme Court, it is irrelevant where and how the entrusted information is recorded, whether this information is in the lawyer’s or in the client’s possession, and if that information was shared with a third party. In principle, the duty to respect confidentiality applies to any person working for the lawyer. If information falls within the lawyer’s legal privilege, that person can invoke legal privilege by proxy.

 

This Dutch Supreme Court decision, however, does not deal with the question of whether foreign in-house counsel equally enjoy the full legal privilege as set out in the decision. In contrast, in a case decided by the Rotterdam District Court in criminal proceedings, the test of whether foreign in-house counsel in question had signed the charter provided by the Netherlands Bar was applied, and the court reviewed whether the independent professional practice by these in-house counsel was otherwise guaranteed. The district court determined that there were factors suggesting this was not the case, seeing that the head of the legal department was part of the company’s executive committee. On that basis, the district court concluded that the head of the legal department was therefore partly responsible for the general course of affairs within the company, and that this would, in turn, jeopardise the independent position of the legal department, including of any foreign in-house counsel working in that department.

 

Referring to the latter consideration, the district court held that foreign in-house counsel working outside the Netherlands, too, could not invoke legal privilege in the Netherlands, even though the court also noted that Dutch law in principle recognises legal privilege if it is granted under the law of the country of residence. An appeal is pending against this decision of the district court.

 

Status test is the better approach

So where the English High Court in PJSC Tatneft concluded that the “function” of the in-house counsel is decisive and not the “status” of the lawyer in question, the Dutch district court took a different approach.

 

However, on the basis of the Dutch Supreme Court’s decision mentioned above, and comparing it to the High Court’s decision, we believe the right approach to the attribution of legal privilege to foreign in-house counsel would be to look at the function of that in-house counsel, rather than to assess the (circumstantial) “status” of the in-house counsel. The relevant question is whether the company turns to this in-house counsel for legal advice expecting this to be privileged, i.e. whether the “function” of the in-house counsel is to render legal advice to the company. If this legal privilege could be challenged on the basis of the “status” of a foreign in-house lawyer and on whether certain formalities have been adopted, an unlimited number of circumstances could potentially deny legal privilege where this was relied on by the person or company seeking legal advice. This would create unnecessary and disproportional uncertainty.

 

Instead, the test applied by the English High Court, where the “function” of the foreign in-house counsel is of central importance and a broad approach is justified by reasons of fairness, comity and convenience”, is an example we would encourage the Dutch courts to follow. Hopefully, the appeal against the Rotterdam District Court decision, which is currently pending, will steer towards this direction.

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